Tax fallout from filing late

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in Small Business Tax

Q. I filed my tax return late but I’m getting a refund. Will I be penalized? S.B., Reston, Va.

A. Technically, no. The failure-to-file penalty is 5% of your unpaid tax liability for every month, or part of a month, in which your return is late (up to 25% of your unpaid amount). Also, the failure-to-pay penalty is 0.5% of your unpaid taxes for every month, or part of a month, you don’t pay. Thus, both penalties are effectively zero if you’re due a refund. Still, some experts believe that a late filing “opens the door” for greater IRS scrutiny.

Tip: At the very least, you’re giving the IRS more interest-free use of your money by delaying  your refund.

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